Our Case for Change
1. YP’s Financial Performance and Shareholder Returns are Dismal Vs Peers
Management’s reluctance to invest in facilities has led to a loss in competitiveness in its core smelting business. Despite being one of the world's largest zinc smelters, Young Poong lacks sufficient facilities to handle hazardous substances generated from its operations. Poor capital allocation decisions such as this diminishing operational efficiency have contributed to the Company’s deteriorating financial performance.
Young Poong’s Financial Performance
In 2024, Young Poong reported an operating loss of W162.2bn and net loss of W263.3bn, reflecting a net loss three times larger than than the previous year. Excluding dividends from Korea Zinc, this would mark four consecutive years of net loss instead of three. Not only that, YP’s share price has also suffered sustained underperformance with short, medium AND long-term TSR’s (Total Shareholder Return) lagging its peer group by a meaningful magnitude. Shareholders have raised concerns with low returns as the Company suffered three consecutive years of net losses.
Financial Performance of Young Poong’s major affiliates
Youngpoong's affiliates are also showing a sharp decline in sales or turn to operating losses. Youngpoong's key affiliates, Youngpoong Electronics, Signetics, Korea Circuit, and Terranics, have recently shown a decline in operating profit margins or turn to an operating loss, clearly demonstrating Young Poong's lack of management skill.
YP Shareholder Return Policy (Dividends)
YP’s average payout ratio for the term 2015-2020 of 11% is significantly lower than the 40% average payout of Korean listed corporates in 2023. Furthermore, their latest announcement of W50 DPS implying a dividend yield of 0.01% has left shareholders severely discontent.
2. Young Poong’s outdated governance structure and policies have limited oversight and undermined accountability.
The Company has yet to separate the Chair and CEO role, clearly lagging best practice of promoting board independence and effective oversight by introducing practices such as seating an outside director as Chair or establishing fully independent Board nomination committees. YP’s board also currently lacks ESG and remuneration oversight which clearly undermines accountability and raises concerns about its ability to drive sustainable growth.
3. Leadership in Disgrace: Criminal Trials, Sanctions & Corporate Failures Have Damaged YP’s Reputation and Brings Continuity into Question
Young Poong Board’s lack of expertise in technology/innovation, legal/public policy, risk management and ESG has led to continuous workplace safety accidents spanning almost two decades resulting in numerous injuries and fatalities. Due to such deficiencies in governance structure, many incidents have occurred eroding shareholder confidence and trust.
Business suspensions
Due to a recent ruling by the Supreme Court regarding illegal wastewater discharge and unauthorized piping, operations at the Seokpo Smelting Plant will be halted from February 26 to April 24, 2025. An additional 10-day suspension beginning the 25th will be added on further dragging earnings performance.
Safety Accidents
Since 1997 there have been 15 fatalities along with numerous injuries, but the two fatalities in 2024 led to the arrest of YP’s CEO and COO under Serious Accidents Punishment Act (SAPA).
Fines
In the lawsuit challenging the February 2025 fine, the court also acknowledged that cadmium had indeed been leaked into the Nakdong River from the Seokpo Smelter between April 2019 to 2021, ruling that the W28bn was lawful. As such, environmental issues are arising at YP without cessation.
4. In order to reform outdated governance structures and unlock YP shareholder value, YPPC presents three shareholder proposals
Item 4-2: Election of Audit Committee Member (Outside Director) Kim Kyung Yul
By appointing an audit committee member with the most necessary skills and expertise missing on YP’s board., we aim to strengthen the Board‘s effectiveness and oversight.
Item 2-4: Amendment of Articles of Incorporation (Introduction of Cumulative Voting)
Cumulative voting is a method that protects the rights of minority shareholders in cases where there is a controlling shareholder by allowing them to concentrate their votes on specific director candidates. If the provision excluding cumulative voting is deleted, minority shareholders will have a stronger influence on the election of directors.
Item: 2-2: Amendment of Articles of Incorporation (Introduction of Stock Dividend)
Young Poong’s dividend payout ratio is significantly lower than that of peers. Furthermore, YP’s continued weak financial performance has strained cash flow generation. Hence, the introduction of stock dividends as a method of shareholder return is critical.